A tale of two chippies

Yet because they are both often bracketed as 'chips companies', it's interesting to consider their relative well-being.

Motorola has been hogging the headlines this week. Post gold rush it has realised it needs to reduce its headcount. A worldwide 'rationalisation' of tens of thousands of staff means several operations in Scotland are in danger of being shut down. Cutbacks are a certainty. Even UK PM Tony Blair has tried to get involved.

In short, business has been better.

ARM, on the other hand, has reported positive Q1 results that pushed its share price up 14 per cent in early trading. Alright, so profits were only £11.4m on revenues of £32.5m, but the company has always been valued on its potential.

Ten weeks ago we wrote about why everything isn't rosy for ARM, how it must still rely on the health of those it supplies. That still holds. However, in tough times it has a huge advantage over its competitors - it doesn't actually make anything.

The cost of running fabs - the plants where chips are made - is huge. Commentators are now sure to be questioning Motorola's rescue move for the troubled Hyundai facility in Scotland.

ARM licenses its designs to over two dozen other players who worry about making the processors.

Not everyone can be in the same boat. Someone has to do the dirty work. But it shows ARM as a high-tech player in a still enviable position, and Motorola as one of those tech giants needing to change course.

And what of ARM's competitors, the ones who say they can design chips better and even build them? Motorola used to be one of those, but last December it too became an ARM licensee. What an upstart.